BCI and partners creating Canadian real estate fund

The British Columbia Investment Management Corp. is teaming up with RBC Global Asset Management Inc. and QuadReal Property Group on a project involving $7 billion worth of commercial real estate.

The venture will bring together more than 40 of the BCI’s existing Canadian real estate assets in one portfolio. The BCI and the newly minted RBC Canadian core real estate fund will function as co-owners of the portfolio’s properties, inviting other institutional investors to buy into the fund as an income-producing real estate strategy. QuadReal, an operation established and owned by the BCI, will oversee management of the properties.

“All of these assets that comprise the portfolio are today 100 per cent owned by the BCI and managed by QuadReal on behalf of the BCI,” says Michael Kitt, head of real estate equity investments at RBC Global Asset Management. “So the portfolio will be constructed over a three-year period and at the end of the three years, RBC GAM, the new fund, will be a 50 per cent owner in every one of those assets in partnership with the BCI.”

The portfolio is diversified across office, retail, industrial and residential assets, with a focus on Canada’s major markets, specifically Calgary, Edmonton, Montreal, Ottawa, Toronto, Vancouver and Victoria, says Kitt.

The diversification that’s already established in the portfolio would likely take an investor two decades to build if they were working alone, he adds, noting it’s very difficult to buy these core assets individually and then assemble a diversified portfolio.

The fund is designed to appeal to institutional investors of virtually any size and should provide an access point for those that are small- to mid-size and looking for exposure to real assets, says Kitt. As well, there’s no waiting list and no established minimum investment. “We’re talking quite openly to the smallest pension funds we have [as clients], the smallest endowments we have, about the fit, because every client’s a good client and everyone deserves to have the conversation. So we’ll see how that evolves.”

For the BCI, the strategy is part of its move to diversify its real estate holdings on a global scale, says Dennis Lopez, chief executive officer of QuadReal.

“In the last couple of years, we’ve been clear in announcing we’re looking to increase our international allocation. We think it’s important from a diversification perspective to do that. So really what this allows us to do is to continue to grow in Canada, which we want to do. We have several massive projects ongoing here in Canada. . . . But by doing this, it allows us to diversify internationally.”